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The Collection Wed, 02 Jul 25 |
Multiple stories, multiple perspectives, one theme worth your time—every week. |
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All products sell a promise. But only after you’ve bought them do you find out how well they live up to it. Life insurance makes a clear pledge, yet the buyer isn’t meant to witness their own policy in action. They have to make do with the promise.
It’s a hard sell. But every once in a while, something harrowing serves as a stark reminder of its importance.
Consider the recent Air India crash in Gujarat. The insurance claims—covering loss of life and the airline’s claim of its aircraft—are reportedly expected to be among the costliest, totalling around $475 million. As a result, aviation insurance premiums could go up by 10–30%.
Insurance penetration in India remains low. According to the Insurance Regulatory and Development Authority of India (Irdai), premiums accounted for just 3.7% of the country’s GDP, far below the global average of 7%. Only around a quarter of Indians hold a life-insurance policy.
In this week’s The Collection, we look at the various types of insurance that cover loss of life and other unforeseen events, what prevents more Indians from having them, and how some insurance products simply aren’t well designed.
In June, my colleague Sudeshna Ray wrote a revelatory story about how 47 million life-insurance policyholders went out of cover—all because of a bubble that burst.
Insurance professionals who spoke to The Ken pointed out that such a dramatic collapse in coverage is usually caused by something big—say, a pandemic. This time, there was no such trigger.
The real problem, it turns out, sits squarely within the microfinance industry. Or as one long-time sector veteran put it, “It’s a self-inflicted crisis, and the bubble is popping now.” After years of aggressive lending, the industry is finally dealing with the consequences. Defaults are up, lenders are pulling back, and life insurers, many of whom rely on microfinance platforms to distribute bundled group policies, are quietly backing away. This matters because group credit-linked life insurance, the kind typically attached to microloans, is a fragile thing.
But here’s the catch: this wasn’t merely a case of policy lapses or loan defaults. Post-vaccine mortality data also holds critical clues.
47 million lost life insurance in one year. Nobody blinked
Everyone saw it coming—insurers, microinsurance, even healthcare trackers. But it’s a self-made crisis
Many also aren’t convinced enough to renew a life-insurance policy beyond a specific term. That’s why one-third of LIC’s policy payments went to surrenders and withdrawals in FY23. Mis-selling was also a key reason so many dropped their coverage after their first year.
How life insurers stop at nothing to get you to renew a terrible policy
Of the US$40 billion payouts LIC made last fiscal, surrenders and withdrawals made up a third; it would've been hit the worst had a key reform been pushed through
Loss of life isn’t covered by life insurance alone. Travel insurance and other general insurance also provide protection.
In 2023, in the wake of a terrible train accident in Odisha, a former Ministry of Railways official revealed to The Ken that only 50% of railway passengers opt for any kind of insurance. This, despite the policy offering Rs 10 lakh insurance for just Rs 35 paise.
Why would half the railway passengers forgo insurance when it costs virtually nothing?
Why aren’t insurers super busy after the Odisha train crash?
For a variety of reasons, a large majority of Indian travellers are not covered by any form of travel insurance
In India, large-scale losses aren’t just limited to train or plane crashes.
Last year, India experienced extreme weather events—floods, earthquakes, and more—in one or more parts of the country for 322 out of 366 days. The toll was devastating: over 3,400 lives were lost and more than 290,000 houses were damaged.
With climate change intensifying, the insurance industry faces spiralling losses.
To counter this, experts propose an unconventional solution: parametric insurance, where payouts are not based on the actual incurred losses, but rather the trigger condition’s severity.
Extreme weather cost Indians $7.8B last year. But try buying insurance for that
With even the insurance industry's losses mounting, catastrophic climate events require more than just a standard product
Irdai, India’s insurance regulator, wants reforms. It has a slew of major initiatives in the pipeline, including the much-delayed online marketplace Bima Sugam, which would enable people to buy, sell, and service insurance products as well as settle claims. But ever since Debasish Panda stepped down as chairman in March, the post hasn’t been filled, and launches have been delayed.
Last November, we wrote about Panda, the brains behind the marketplace. We covered how it could challenge major insurance providers, and how Bima Sugam’s vision differs from private alternatives.
One man’s dream makes Insurancedekho and Policybazaar nervous
Debasish Panda, head of India's insurance regulator, is bringing the fight to the marketplaces with an unexpected new rival
That’s a wrap for this week. Write to [email protected] with your thoughts and suggestions, or leave a comment on our web or app.
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Rahul leads the promotion and distribution efforts for the journalism produced by The Ken. He works at the intersection of the publication's editorial and business operations.
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